Says it will reject federal judge's compromise and that the 'jury got it right' with its $1.3 billion judgment for information theft

A defiant Oracle Thursday vowed to continue its legal battle against rival SAP after a federal judge in California threw out the $1.3 billion judgment the company had won against SAP late last year. In a statement released shortly after the verdict, Oracle said it intends to "pursue the full measure of damages" it believes SAP owes it for the theft of its intellectual property.

"There was voluminous evidence regarding the massive scope of the theft, clear involvement of SAP management in the misconduct and the tremendous value of the intellectual property stolen," Oracle said, "We believe the jury got it right."

In a development not entirely unexpected, U.S. District Court Judge Phyllis Hamilton in Oakland, Calif., today upheld SAP's request that the court lower the $1.3 billion in damages that a jury late last year ordered it to pay Oracle. In announcing the decision, Hamilton called the jury award "grossly excessive" and asked that Oracle either accept a lower $272 million payment or submit to a new trial.

In a statement, SAP said it welcomed today's decision. "We are very gratified with the Court's decision," the company said. "We believed the jury's verdict was wrong and are pleased at the significant reduction in damages."

Oracle's lawsuit against SAP stems from the actions of a now defunct SAP subsidiary called TomorrowNow, which provided third-party support services to Oracle customers. Oracle claimed that TomorrowNow infringed on and stole Oracle's intellectual property. The database vendor had initially sought $4 billion in damages. The jury's $1.3 billion award was the largest ever in an intellectual property theft case.

SAP initially insisted that it knew nothing about the intellectual property theft. However, after close to three and a half years of litigation, SAP announced that it would not contest Oracle's claim for contributory infringement. SAP later admitted that some of its executives may have known about TomorrowNow's illegal activitities.

So while the outcome of the case was never in doubt, the size of the jury's award surprised many. "My belief all along was that $1.3 billion was excessive because it was based on the license value of the Oracle software that was downloaded" by TomorrowNow, said Paul Hamerman, an analyst with Forrester Research. "My belief was that the damages should have been more reflective of the contract value of the support engagements" TomorrowNow had with Oracle customers. Hamerman added, though, that it's unclear how Judge Hamilton arrived at the $272 million figure.

Hamerman said that he expects that Oracle will continue to fight for the original verdict for as long as it can. "I think they will go to trial again and drag this out a bit further," he said. "Oracle is a tough customer in court and they are willing to spend the money to litigate" -- especially if it can keep SAP on the defensive, he said. "I think it would be prudent for them to take the award the judge has handed them."

Frank Scavo, manging partner of IT consulting firm Strativa, said the neither the judge's decision nor Oracle's response are surprising. "Oracle wants to continue to litigate," he said. "As long as there is uncertainty around this decision and litigation continues, they have SAP back on its heels."

More important, Oracle will likely not want to do anything that would weaken its position in a seprate intellectual property theft lawsuit it has filed against Rimini Street another provider of relatively low-cost third-party support services for enterprise software.

Oracle accused Rimini of intellectual property theft in delivering its support services, just as it did with TomorrowNow. Rimini has insisted that it hasn't infringed on Oracle intellectual property. The company has countersued Oracle for attempting to thwart it from delivering legitimate third-party software support services for enterprise customers.

At stake is the question of whether third-party services can offer support and maintenance services for customers of Oracle and other large software vendors without being accused of intellectual property theft and other misdeeds. The issue is an important one for large users because third-party support services such as those offered by Rimini and the now-defunct TomorrowNow have traditionally been delivered at a fraction of the cost charged by enterprise vendors.

Oracle will likely be concerned that accepting Judge Hamilton's proposal would adversely affect its lawsuit against Rimini, Scavo said. "My thinking is that at this point, Oracle would rather continue to keep this matter in court rather than see it resolved," he said.